Atlantic City is facing its biggest threat in decades: New York City.
At the East Coast Gaming Congress in Atlantic City last week, industry leaders gathered to discuss the threat. They agreed that casinos in New York City would be damaging; they are also leery of a Meadowlands casino in the NYC suburbs of northern New Jersey. For the casinos on the Boardwalk, the impending threat of billion-dollar megaresorts in New York City is a reply to another competitor that popped up two decades ago and hit the A.C. casinos hard.
In 2004, Pennsylvania legalized slot-machine casinos. The first games did not appear before 2006, but by 2008, Pennsylvania was having an impact. Even then, the slots were not all the city faced; it was also the time of the Great Recession. Slots in Pennsylvania and a recession created a crisis for Atlantic City that lasted for years and resulted in five casinos closing.
With the help of then-Governor Chris Christie, the gambling destination began to dig itself out of the pit of failure. Hard Rock, a new Caesars, and AC Ocean Walk brought new visions, fresh cash, and renewed enthusiasm to the Boardwalk. But the recovery was not quick or painless. The poster child for both the crisis and the recovery was Revel.
Revel had a troubled life from its inception. Conceived in 2002 or so, Revel was envisioned to be a new kind of casino, different from the others in Atlantic City. During the recession, construction stopped. Christie helped negotiate new financing and construction resumed. It opened in 2012 and closed in 2014. The design and operating philosophy did not work; it simply did not anticipate slots across the border. By 2012, Pennsylvania had taken away a major portion of the market. After 2016, Revel sold three times before a new owner renamed it Ocean City and saved the property from another trip to bankruptcy court and the auction block.
The companies that came to the rescue in Atlantic City were, in part, tempted by two new forms of gaming in New Jersey: sports betting andinternet gambling. Neither took off immediately, but they have certainly taken off since. In 2023, sports generated $1.0 billion in gross revenue, up 31 percent from 2022; igaming reported $1.9 billion, an increase of 15.7 percent over 2022. Casino revenue for 2023 was $2.8 billion, only 2.2 percent more than the previous year. The casinos’ revenue fell short of the $5.2 billion that was generated way back in 2002.
In simple terms, casino revenue in 2024 was half that of 2006. But in 2024, casino revenue is only part of the story. With igaming and sports, gross gaming revenue in 2023 was more than in 2006. It was the first year that gaming revenue in New Jersey exceeded its previous high point in the pre-recession, pre-Pennsylvania, slot era.
Sports and igaming have grown at double-digit rates since being introduced. They are not exclusive to New Jersey. The same growth in mobile sports wagering and igaming has been seen in Pennsylvania and Michigan. For certain there is a limit, but those states have not reached it yet. They are, however, approaching another limit: Clearly, there is a finite number of casinos customers. That is the new and impending crisis for Atlantic City. There are possibly four more casinos on the horizon.
One is in New Jersey. Jeff Gural, the owner of the Meadowlands, has been lobbying for gaming for years. He failed to get a casino in 2016, but is back seeking a casino and using the New York threat as bait. He suggests that people want a casino at the Meadowlands, saving them the drive to New York City or Atlantic City. Gural cites the bridge tolls as one of the reasons people want a casino in the Meadowlands. People may want it, but the casinos in Atlantic City do not; more competition is not what they need. Gural may not succeed in getting his casino, but New York City will, eventually.
New York authorized casinos in 2013. The enabling legislation authorized seven casinos, with four to begin. The four were to have seven years before the next three licenses would be granted. Those last three licenses are designed for New York City, at the center of a metropolitan area with about 23 million residents. In April 2023, state officials authorized the final licenses. It will not be a quick process, as nearly a year and a half later, no licenses have been granted. In fact, officials have said it will be 2025 or later before operators and their projects are chosen.
One of the bidders is Las Vegas Sands, proposing a $5 billion project on Long Island. Sands has serious opposition to its plan, in the form of the usual “crime and traffic” casinos face. Sands also has serious competition from five other well-heeled bidders. The bids all propose billion-dollar resorts with lots of amenities, mixed retail, housing, and other enticements. But right now, Las Vegas Sands’s biggest challenge is the process. Sands CEO Rob Goldstein recently said, “We’re very disappointed by New York. We’ve been working there for a long time and we thought it would happen in 2024. Now, they’re saying 2025 or 2026. We don’t have any clarity and to be honest, it’s confusing and disappointing. We’ve put a lot of time and work into New York, but I have no guidance. We wish they’d figure it out and let us know. We’ll remain hopeful that things turn around there.”
As frustrating as that is for LV Sands, along with Wynn, Bally’s, Caesars, Genting, and MGM, it is comforting for Atlantic City. With the delay,five years or more will pass before three new casino-resorts open in New York City. The challenge for Atlantic City is to develop its resorts to withstand that competition. It is unlikely that all nine casinos operating in AC will survive. In 2012, Atlantic City had 12 casinos and five closed in the wake of Pennsylvania and the recession.
In 2007, NBC News opined that a new Atlantic City was on the way. Four companies were going to be investing a total of $9 billion. The result would allow Atlantic City to catch Las Vegas. The network did not anticipate casinos in Pennsylvania, a recession, or a transformed Las Vegas. The opinion, however, can give some clarity to the situation Atlantic City will be facing in 2030. It will be a small regional casino market with limited capacity and offerings. New York is projected to take between 20 percent and 30 percent of the market.
The casinos in Atlantic City will need to reinvest, update, and keep the product fresh and competitive. But no amount of investment will make a silk purse out of the pig’s ear.
The good news is, igaming and sports betting should continue to grow and replace the declining casino revenue. That alone should guarantee the survival of some of the casinos in Atlantic City.
